The paper studies the impact of debt maturity on firms' performance. The analysis exploits the Mutuo di Riassetto (MR), a policy created by the Province of Trento with the aim of substituting firms' short-run debt with long-run debt.
MR caused a marked - but temporary - increase in the share of long-term bank debt held by firms, with positive effects on their profitability (through the reduction of interest expense) and volume of intangible assets. The change in debt maturity did not have any other effects on firms' performance: sales, tangible assets, labour cost, and credit access did not vary significantly after the policy was implemented. MR generated, instead, a rise in firms' probability of default.
